Martin Cloutier explains how he thinks advisors can turn the threat clients see in headlines into opportunity
Bond sell offs have pushed yields to highs we haven’t seen since the great financial crisis. Plenty of headlines have grabbed that one datapoint and provoked panic among investors. Interest rates continue to rise as central banks seek to tame sticky inflation and investors sell US treasury bonds, some acting as ‘bond vigilantes’ to force deleveraging.
An echo of 2008 does not mean we’re heading down the same path. Martin Cloutier knows that well. The senior investment advisor at Harbourfront Wealth Management told WP why he isn’t too concerned about rising interest rates, and how he addresses client fears in an era of constant panic-provoking information.
“There’s always red flags [in the news] and you can always find them if you look hard enough,” Cloutier says. “I keep a market downturn file with material from the 19 years I’ve been in business…and we constantly see a recycling of the same apocalypse. It’s a matter of navigating your clients through that noise, making changes to their portfolios, and showing them what we’re doing on their behalf.
“Clients are sick and tired of being told to jump in the roller coaster cart and hold on for dear life. We need to do more for our clients. When we see risks and we see opportunities we need to convert that risk into opportunity.”
Where can we find opportunity
Rising interest rates are one area where Cloutier sees more opportunity than threat for his clients. At the same time, he is concerned about equity performance in the near-term. He’s therefore capturing more of the high yields available via floating rate bonds on the market while shifting assets slightly away from equities.
Cloutier is also a firm believer in alternative assets as a way to de-risk client portfolios. In periods when equities and fixed income offer correlated performance and advisors feel there’s nowhere to hide, Cloutier argues that alternative investments can offer positive returns. Harbourfront, he notes, has been following the pension fund model of investing in alternatives and private assets for the past five years. Cloutier says that this allocation has helped moderate volatility in client portfolios and create a greater sense of calm.
He notes, for example, that while many of his clients are worried about the real estate market in much of the country, the real estate exposure they get through Cloutier and Harbourfront has them far less worried. That’s because he’s largely allocated them to apartment housing, which tends to be both more recession-resistant and easier to understand. Private assets like these, he argues, can help deliver peace of mind.
“I don’t have panicked clients, which is good news,” Cloutier says. “I think that boils down to three reasons: proper client communication, changing client portfolios based on market conditions, and lowering volatility in the client’s portfolio.”
Name your clients’ fears when you address them
Communication underpins Cloutier’s approach. As he makes tweaks to client portfolios he explains in detail what he’s doing, why, and how he expects his decisions will help. Via text, email, phone or newsletter sendouts Cloutier ensures he’s present in his clients’ minds before they even begin to worry about the news.
When worrying times come, his policy is to address client concerns head on. Talking around an issue, or constantly putting a positive spin on events can seem like obfuscation. If a client raises concerns about inflation, Cloutier talks about inflation, if they’re talking about real estate, he talks about real estate, if they’re talking about rising yields and supposedly GFC-like conditions, he addresses their concerns head-on.
“We’ve seen this wolf before, just in different clothing. Every crisis looks a little bit different from the last, but just like every other crisis, they’ll strut and fret their hour on the stage and then fade into memory,” Cloutier says. “Nothing’s really stopped capitalism before, so why would it be different this time? We have to be cheerleaders for our clients and encourage them to look past the crisis of the day and this recycling of the apocalypse. We need to focus on the returns that markets have provided over the years despite all of that bad news.”
